Financing with a twist

More groups explore how Pay For Success financing can help kids

After bursting onto the national scene a few years ago, Pay For Success financing is gaining traction among Colorado school districts and early childhood organizations.

The Early Childhood Council of Boulder County and Adams County School District 50 are both exploring the British-born financing mechanism as a way to pay for underfunded early childhood programs. Aurora Public Schools may use the model as well, to beef up college and career readiness.

The exploratory work by all three groups unfolds as state law-makers consider Pay For Success legislation for the second year in a row. Last year’s bill, which was introduced late in the session and focused exclusively on early childhood programs, died in committee.

Chalkbeat reporting on PFS

Pay For Success resources

Common PFS focus areas 

  • Early childhood
  • Recidivism
  • Chronic homelessness
  • Juvenile Justice
  • Asthma

The idea behind Pay For Success, or PFS, is that private investors or philanthropists pay upfront for evidence-based social programs. If those programs save public money by preventing costly interventions such as emergency room visits or special education services, the investors are repaid with interest.

The potential savings accrued from Pay For Success projects are calculated by comparing the public costs of an individual or group after an intervention program to the public costs of an individual or group with no intervention.

For example, a school district considering a preschool-based Pay For Success project might use national studies showing that high-quality preschool reduces special education enrollment by 15 percent, to estimate its prospective savings.

If for some reason a Pay For Success project doesn’t yield the hoped-for savings, the investors lose some or all of their money. Therein lies part of the appeal of Pay For Success. While it can inject new funding into effective prevention programs, there is relatively little financial risk to the public entities that stand to benefit from those programs long-term.

When it comes to projects targeting children and youth, the Early Childhood Council of Boulder County is farthest along in the complicated development process. (Among all Colorado projects, a Denver effort to address chronic homelessness among adults is closest to fruition.)

The council is studying the possible expansion of a 30-year-old home-visiting program—the “Community Infant Program”—that aims to prevent child abuse and neglect. If the current cost-modeling work shows an expansion is feasible, the project could launch in 2017 with an five-year investment of $2-4 million. It’s not yet clear who the project’s investors would be.

“We’re not seeing any yellow or red lights. They’re all green,” said Bobbie Watson, executive director of the council.

Growing school district interest

In the last few months, local school districts have also begun testing the waters of Pay For Success. Both Adams 50 and Aurora have applied for grants through the University of Utah Policy Innovation Lab, one of a several intermediary organizations distributing federal dollars to build PFS capacity. The grants of up to $250,000 would primarily pay for new in-house employees to help develop PFS projects in each district.

Adams 50 is also an alternate finalist for a grant through the Boston-based Third Sector Capital Partners, another intermediary for Pay For Success capacity-building grants.

The two districts’ bid for such funding speaks to one of the biggest challenges facing organizations interested in the Pay For Success path: the need for money and expertise long before a project launches.

“This is the big problem with PFS right now,” said Mary Wickersham, a consultant working on the Boulder project. “There’s this dearth of funding on the front end.”

While Watson and her team raised around $150,000 to cover those costs, it’s not easy.

Of the more than 40 Pay For Success proposals received in response to a state “Request For Information” in 2013, only two–Denver’s chronic homelessness project and Boulder’s home-visiting project–are actively moving forward.

Dozens of others, “some portion of which could be great deals … are kind of languishing right now for want of support to get them to the finish line,” said Wickersham.

Preschool potential

Following in the footsteps of school districts in Chicago and Salt Lake City, Adams 50 is considering a PFS project that would expand preschool access. Specifically, the district and two community partners, Growing Home and the Early Childhood Partnership of Adams County, want to increase the number of full-day preschool slots in the district and add parenting classes.

The hope is that such a PFS program would decrease special education costs and improve early reading scores, said Mat Aubuchon, director of early childhood education in Adams 50.

“I think it’s exciting: a potentially totally different kind of funding stream in [early childhood education],” he said.

While half-day preschool is relatively accessible in the district, Aubuchon said there are very few state-funded full-day slots and most families can’t afford to pay for it out of pocket. Three-quarters of the district’s students are eligible for free or reduced-price meals, a proxy for low-income status.

The district and its partners are just starting to hold meetings on Pay For Success with potential investors in the philanthropic community, said Aubuchon. The earliest any project could launch is the 2016-17 school year.

“Obviously, we’re at the very infancy state of even exploring something like this,” he said.

Creating a college-bound culture

Meanwhile, Aurora Public Schools, in partnership with the Aurora Public Schools Foundation, is looking at Pay For Success with an eye toward improving outcomes for older kids.

Borrowing a concept used in Denver schools, the project under consideration would establish “Future Centers” in district high schools where students would get advising on all matters related to college and career readiness. The goal is to strengthen the district’s college-bound culture, decrease drop-out rates, and reduce the need for remediation.

“There’s some really clear metrics of deliverables” around post-secondary readiness, said Cheryl Miller, the district’s assistant director of grants and federal programs. “It perfectly aligns to our new strategic plan.”

Among the state’s 15 largest school districts, Aurora had the lowest on-time graduation rate last year: 55.9 percent. Statewide, 77.3 of high school students graduated on time.

Miller said the district initially considered a preschool-based PFS initiative, but wanted to differentiate itself by trying something outside the early childhood arena.

The goal was to be “doubly innovative,” she said.

More money for mental health

The Early Childhood Council of Boulder County began exploring Pay For Success in late 2013. Intent on using the model to make a positive impact on the youngest children, the council looked at six home-visiting programs already operating in the county.

“My board has particular interest in the birth to three population,” said Watson. “That’s where you get your best return on investment.”

The Community Infant Program, in which nurses and psychotherapists work with families around mental health, rose to the top of the list.

“We have a 30-year track record and I think people were pretty excited about the longevity in the community,” said Program Director Janet Dean.

The program, which has 20 employees and an annual budget of $1.5 million, helps parents create healthy relationships with their babies by addressing issues ranging from post-partum depression to anger, stress and mental illness.

Absent such intervention, children may experience abuse or other types of toxic stress that have long-term consequences on their health, education and well-being. There are financial consequences too, often incurred by the public sector. These can include expensive hospitalizations, court proceedings or entry into the foster care system.

If the number-crunching underway now confirms expectations, Pay For Success funding represents a front-end investment that could defray those back-end costs.

Dean said there are usually 20-30 families waiting for services from the Community Infant Program. An expansion would allow the organization to better serve families in the mountains on the west side of the county and those around Longmont, Lafayette and Louisville.

“We have families waiting for our service,” she said. “Mental health is just not funded, in general, to the level it needs to be funded.”

terms of the deal

Aurora school board approves contract for district’s first DSST campus

Students at a campus of DSST, a charter network that is a big piece of Denver's "portfolio" approach to school management. (Denver Post file)

The Aurora school board on Tuesday night — in its last vote before new board members are sworn in — approved a contract with DSST Public Schools for the charter network’s first school outside of Denver.

The contract spells out enrollment and performance expectations, and upon request from Aurora school board members, ensures DSST will have representation from an Aurora resident on their own network governing board.

In June, the board approved DSST’s application to open four schools — two middle and two high schools — starting with one of each in the fall of 2019. The contract approved Tuesday is only for the first campus of a middle and high school.

During public comment, teachers, some parents and union leaders spoke to the board, as they have in past meetings, speaking against the DSST contract.

Among the speakers Tuesday was Debbie Gerkin, one of the newly elected school board members. Gerkin cited concerns with the plan to allow DSST to hire teachers who don’t yet have certifications, echoing a common criticism of charter schools.

“I appreciate there’s been so much hard work put into the DSST contact,” Gerkin said. “I ask that we continue to think about this.”

Board member Cathy Wildman asked the board if they would consider delaying the vote until the new board members are seated at the end of the month. A majority of current board members said they would not support a delay, noting they’ve spent more than a year working on learning about the DSST application and contract.

The school board first discussed the contract details at a meeting in October. At that time, board members asked district staff to go back to discussions with DSST to suggest that they commit to having someone from Aurora on their board of directors.

School board members asked questions about the details of the enrollment process such as whether there would be a preference for siblings, how student vacancies would be filled and whether the guidelines would really make the school demographics integrated.

According to the contract, DSST will give students in the surrounding neighborhoods, those served by elementary schools Rocky Mountain Prep, Paris, Crawford and Montview, first preference for half of the school’s open seats.

The remaining half will first go to any other Aurora students, but if seats are still available after that, students outside the district may enroll.

Enrollment numbers discussed in a separate presentation at the October board meeting show that the target area for the school, in northwest Aurora, is also the area with the largest declining enrollment. Schools in those neighborhoods have been near capacity, but not overcrowded like other schools in the district.

DSST will have a cap of enrolling no more than 450 students. An enrollment cap for charter schools in Aurora is standard, said Lamont Browne, the director of autonomous schools. In the first year, since the school will start with just sixth graders, the school anticipates enrolling 150 students. By April 1, DSST leaders must show the district that they’ve already enrolled at least 75 of those students.

A large section of the DSST contract spells out the district and school’s responsibilities in serving any students with special needs that may want to enroll at DSST.

The contract also includes a section that gives the district a right to close the school or deny a charter renewal if DSST earns a priority improvement rating from the state and doesn’t improve it after one year.

Recent contracts the Aurora school board approved for other charter schools also have requirements for performance, but not as stringent. The contract for The Academy of Advanced Learning, for instance, requires that school to improve after one year of earning a turnaround rating from the state. The turnaround rating is the lowest a school can get.

DSST has similar performance requirements in its contracts with Denver Public Schools allowing for a nonrenewal of a contract if a school has low ratings, but none of the Denver DSST schools have dropped to the lowest two categories of ratings. DSST schools, in fact, consistently are some of the state’s highest performing on state tests.

What the contract still doesn’t detail is a possible new name for Aurora’s DSST schools (the school originally was called the Denver School of Science and Technology) or how the district and the charter will split the cost of the building.

When Superintendent Rico Munn invited DSST to apply to open a school in Aurora, he offered to pay for half the cost of a new building for the charter school.

The bond voters approved in 2016 included money to pay for a new building for the charter school. The contract reiterates earlier commitments that both the district and the charter network must identify the money for a building by March 30.

A contract for the second 6-12 campus would be negotiated at a later time if the charter school meets performance requirements to move forward with opening the third and fourth schools.

Looking ahead

Union-backed candidates prevail in Aurora — and all sides downplay prospect of big immediate change

Union President Bruce Wilcox, far left, addressing four school board candidates: Debbie Gerkin, Kevin Cox, Kyla Armstrong-Romero and Marques Ivey, as they awaited election results Tuesday. (Photo by Yesenia Robles, Chalkbeat)

One day after school board candidates backed by the teachers union swept into power in Aurora, the district superintendent and leaders of charter schools he recruited downplayed potential conflicts and committed to working with the new members.

Union leaders made similar comments Wednesday, expressing optimism that the newly elected members and Superintendent Rico Munn will forge a fruitful relationship.

The four candidates who will make up a majority on the seven-member school board have been critical of charter schools in interviews with Chalkbeat and candidate questionnaires. But in public comments, including during campaign forums, several of the candidates expressed openness to working with some charter schools depending on the circumstances.

That has left some uncertainty about what the election might mean for charter schools, which are a key piece of Munn’s recent reform efforts in Aurora, and the district’s strategies overall.

The newly elected school board members emphasized Tuesday they want to work with the existing leadership and aren’t planning major changes immediately.

Munn told Chalkbeat on Wednesday he needs to hear from the new board before contemplating any shifts to district priorities.

“In our reform strategy we’ve laid out at least nine different strategies that we’ve been implementing across different schools,” Munn said. “Our current board, and I’m sure our new board, may not like every single one of those. But that’s just an ongoing conversation we have to have.”

Put on notice by state education officials in 2010 for low performance, Aurora Public Schools had little choice but to embark on reforms to better serve its diverse population, which has large numbers of black and Latino students, and young refugees fleeing strife around the world.

Munn, hired in 2013, has overseen an approach the district calls “disruptive innovation.” Along with recruiting high-performing charters to the district, Aurora has adopted a new system for hiring meant to strengthen its principal corps, given schools more control over budgets and created an “innovation zone” providing schools within it greater freedom to experiment.

The district’s efforts have attracted interest from private foundations, education reform groups — and a gradually greater investment of attention and money in school board races, a trend that’s nearly a decade old in neighboring Denver.

Two years ago, reform groups from the left and right and a more engaged teachers union sought to influence the Aurora election. The result was split — two incumbents prevailed, and one of two conservative-backed reform candidates won.

Most of this year’s investment from the reform side came from an independent expenditure committee tied to Democrats For Education Reform. The reform community’s two preferred candidates —Miguel In Suk Lovato and Gail Pough — finished fifth and sixth in the race for the four seats. As of the last big campaign finance report deadline, a committee bankrolled by the teachers union had spent even more to help the union-endorsed slate, billed “Aurora’s A-Team.”

Union leadership and the board candidates on the winning slate have expressed concerns about Aurora Public Schools’ decision to close a struggling school and replace it with a charter school, Rocky Mountain Prep. Also coming in for their criticism: Munn’s invitation to DSST, a high performing charter network, to open in Aurora, and his offer to pay for half the cost of a new building.

The DSST deal is expected to be done after the current board votes on the final contract on Nov. 14 — their last meeting before the new board is sworn in.

Bill Kurtz, the CEO of DSST, said Wednesday the charter school network doesn’t have any concerns about working with board members elected as a union-backed slate.

“We’re excited to meet the new school board in Aurora, and excited about our work in Aurora,” Kurtz said. “Like any school board, we will work hard to start to build a strong relationship with the new board to collaborate so we can best serve students in Aurora … Our view of working with the school board in Aurora is no different today than it was yesterday.”

James Cryan, CEO of Rocky Mountain Prep, voiced a similar sentiment.

“I don’t have any concerns at this point,” Cryan said. “We’re proud to be a part of that community.”

Others who support some of Munn’s strategies are urging patience. Tyler Sandberg, a co-founder and senior policy adviser at Ready Colorado, a conservative education reform nonprofit that also invested in the race, said education reform policy discussions are in the early stages in Aurora.

“Charters are only just beginning to demonstrate to the community the quality they can bring,” Sandberg said. “I’m hopeful that the new board members are going to go to the community and realize how empowering some of these charter schools have been for these students. I’m hopeful schools like Rocky Mountain Prep and DSST are going to be able to make a pretty good impression.”

Sandberg also said that reform groups were at a disadvantage against unions which have “built in ground game and funding structure.”

The state teachers union, Colorado Education Association, invested heavily in Aurora after new leadership at the local level began to highlight the concerns of educators including the charter conversion and the DSST invitation, union officials say.

“The community didn’t want to become Denver East,” said Kerrie Dallman, president of the Colorado Education Association, a reference to the charter-friendly district next door. “They want to create their own vision of their quality public schools and they want a healthy relationship with the school district, board of education and community.”

Munn has repeatedly expressed a similar message — that Aurora’s school improvement strategies are not a carbon copy of Denver’s and that they are tailored to Aurora’s needs.

Aurora showed enough improvement to pull itself off the state’s watch list for persistent low performance, sparing itself from a state-sanctioned improvement plan. Outside groups, however, including education reform-friendly groups, have complained that the district isn’t doing nearly enough, citing disturbingly low academic proficiency and other troubling statistics.

Although union members and supporters had plenty to celebrate after Tuesday’s election, not all of organizers’ goals were accomplished. Vicky McRoberts, a former union leader who helped work on the Aurora campaign for the teachers union, said Tuesday night that ambitious goals to engage teachers in the campaign fell short.

But she said volunteers who did help campaign were successful in connecting with voters on issues polls showed they cared about — such as increasing career and technical opportunities for students.

Bruce Wilcox, president of the Aurora teacher’s union, said Wednesday that teachers from outside Aurora helped the campaign, as well.

“We also had more teachers than in the past from our own district,” Wilcox said. “A lot of our teachers did more that one event. I think teachers here in the district recognized that this was an important election.”

Wilcox said the union can’t control what the slate of new board members will do, but said teachers and the union just wanted more collaboration with the district, and to feel that their opinion will be heard.

“I don’t anticipate this board to make any sweeping changes,” Wilcox said. “I’m hoping this board can establish a relationship with Mr. Munn and move forward. We’re at a great crossroads. Our long range plans have come to an end. What better way to start that work moving forward.”